Brazil’s real posted its second straight weekly decline as renewed financial stress in Portugal and the U.S. Federal Reserve’s plan to curtail stimulus diminished the appetite for emerging-market assets.
The real slid 0.3 percent this week to 2.2210 per U.S. dollar in Sao Paulo and was little changed today. Swap rates on contracts maturing in January 2016 climbed three basis points, or 0.03 percentage point, to 11.12 percent and were up by the same amount since July 4.
The currency dropped yesterday as a parent company of Banco Espirito Santo SA in Portugal missed some short-term debt payments. Also weighing on the real were Fed minutes indicating that the U.S. central bank’s bond purchase program will end in October with a final reduction of $15 billion in buying if the economy progresses as expected.
“The real was mostly influenced by external factors this week,” Joao Paulo de Gracia Correa, a currency trader at Correparti Corretora de Cambio in Curitiba, said in a telephone interview. “Bad sentiment regarding Portugal’s financial stability damaged currencies mostly from emerging markets while the Fed’s minutes were favorable for an appreciation of the dollar worldwide.”
To bolster the real and limit import price increases, Brazil sold $198.7 million of currency swaps today and rolled over contracts worth $346.2 million. The central bank plans to keep offering $200 million in swaps each business day at least through the end of the year.
After the World Cup soccer tournament concludes this weekend, attention will start to shift back to the election debate and President Dilma Rousseff’s chances of being re-elected in October, according to de Gracia Correa.
Speculation that Rousseff will face a runoff amid slowing growth and above-target inflation has helped push the real up 6.4 percent this year, the most among 24 emerging-market currencies tracked by Bloomberg.
Policy makers increased the target lending rate nine consecutive times to curb inflation before holding it at 11 percent on May 28 as the nation’s economy slowed. The central bank is next scheduled to decide on borrowing costs July 16.